The Price of Cebu Pacific’s Rapid Growth

Cebu Pacific’s rise from a mere low-fare airline to a national carrier has been impressive.

From 24 daily flights between Manila, Cebu and Davao in 1996, its frequency increased to 80 flights in 18 destinations in 2001. By 2008, Cebu Pacific was named the top Asian airline in terms of growth, with passenger surging from 3.45 million in 2006 to 5.5 million in 2007. Now it flies to 52 destinations on a fleet of 43.

With the help of government’s market deregulation, Cebu Pacific, under the management of JG Summit Holdings, flew to places previously not served by other carriers. Its no-frills approach attracted even more passengers, thus staying true with its logo “Why everyJuan flies”.

cebu_pacific_counterI have been flying Cebu Pacific most of my trips to the Philippines. With several flights to choose from, timing wasn’t much of an issue. I can fly on day time or take a red eye shift. I can fly direct to Davao (an obvious choice but this sector was short-lived), or pass through Manila or Cebu at my discretion.

Flights were mostly on-time too, so the infamous Plane Always Late definition of the erstwhile flag-carrier’s acronym was even more pronounced.

But with aggressive growth ambitions in mind, Cebu Pacific seemed lean more on revenue generation to support its plans while customer approval rating apparently dipped. As  more destinations were unveiled, so were the fees passengers have to deal with. The 15-kilogram check-in luggage, for instance, used to be part of the standard fare. Now, passengers are charged separately, plus an option for heavier baggage at extra fees.

Although this helps hand carry passengers save money, this scheme impacts a wider customer base. If passengers were already used to not munching anything in the cabin for free, CEB now up sell its flights with favorite Filipino dishes for hungry passengers, on top of the regular souvenir items. Wait, we can make  money further: introduce seat reservation system which enables passengers to choose seats.

Rising fuel cost has always been the obstacle to raking in profits, so being creative in pricing methods is but crucial in the survival and sustainability of the business, now that Cebu Pacific has wrested the coveted “flag-carrier” status.

Increased security measures, no matter how necessary, adds to passenger inconvenience and eventually drop in on-time performance. As of last check, May 2013 on-time performance was just 69.7%, a far cry several years ago when efficiency hovered around the 90s. When I flew Cebu Pacific last week (May 28th), our 1:35am flight for Cebu left Hong Kong International Airport 40 minutes later.

Inside the cabin I learned that the aircraft arrived late, so onward flight’s customary procedures — cleaning, refueling, and baggage loading — had to be delayed. Maybe it’s a forgivable offense but who knows the real culprit could be  some other unforgivable reasons.

cebu-pacific-1peso-fareJust a day after I returned to Hong Kong, the unfortunate landing at Davao airport took place. Cebu Pacific is not a stranger to previous air tragedies — the 1998 Cebu Pacific 5J 387 crash at the mountains of Misamis Oriental is one of the worst in Philippine aviation history — flight 5J 971 from Manila skidded off the runway of Davao’s Francisco Bangoy International Airport, leaving passengers in state of shock, but thankfully alive.

According to reports, flight attendants lacked crisis management skills in their failure to respond appropriately. This was aggravated by airport authorities refusing the entry of local rescue team into the premises, which prompted outgoing city mayor Sara Duterte to label them as liars. No wonder that it’s almost a necessity to include insurance in booking tickets online, even if I fail to do so.

I would imagine that Cebu Pacific excels in its marketing arm: regular promotion newsletters that feature Piso Sale and seasonal slogans like “Flights, Camera, Action”, “Stop Book and Listen” and “Juan to Go Farther”. Its short-lived dancing cabin crew surely attracted attention — and derision — of the media. But as the airline flexed its marketing muscles, other aspects are left wanting. Customer service may be understaffed or overworked, and it showed when Cebu Pacific recorded the highest number of complaints between December 2012 and March 2013.

Although active in social media, its messaging is almost exclusive to promotional offers (check out Cebu Pacific Facebook page), and devoid of contingencies, apologies and assurance to passengers affected by flight delays, cancellations and this Davao airport incident. Even after the statement from Ateneo de Davao University made rounds in Twitter, its Twitter account didn’t seem to notice and offered anything to address the call for boycott. Its homepage (checked at the moment of writing) doesn’t show guidelines for affected passengers, let alone a link to apology statement. In short, the company’s image is in tatters for failure to address these issues even when channels are available.

If there is one or two who can seize the moment and turn it into PR showcase its the competing carrier. Philippine Airlines can offer stranded Cebu Pacific passengers free one-way ticket to their onward destination — even if it means heading for a 3-hour drive to General Santos City airport. Not only distressed and disgruntled passengers will appreciate the move, more people will notice, and PAL could earn heaps of praise from often forgiving netizens and media alike. Now that’ could turn a one company’s PR disaster into a competitor’s golden opportunity.

Times change and what used to work before may not apply now anymore. As more flights get delayed, the high on-time rate highlighted in its past slogans was quietly replaced with “why everyJuan flies”, justifying its affordability and perhaps, better profit margin. If traditional booking process couldn’t cope up with overhead costs, CEB made adjustments — adding fees for luggage, legroom, food — even boarding passes are now printed on ordinary paper. In the name of profit and growth.

Airlines group forecasts that in 2013, industry profit will reach US$12.7 billion amid high occupancy rate. Cebu Pacific’s plans to expand flights to Middle East and Australia later in the year should help it grab some of the

But as Cebu Pacific grapples this controversy, surely it still has legions of die hard followers — the loyal Juans — but unless it, at least  tries to, addresses its flaws (some of which I’ve mentioned here), Cebu Pacific’s brand equity may drop to a new low, thereby limiting one’s perception of this airline as a cheap, oft-delayed, ill-prepared flag carrier of the Philippines.

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